Aeropostale

I know of that line of apparel only because I have seen the name stenciled across the shirts and sweaters of its devotees. I infer that they are really nice clothes. Somehow I want to own some.

Which makes me wonder why they are not just giving their clothes away. We get free shirts, they get to drape their brand name across our bodies. Perhaps they would be selective about which bodies, but there must be a market opportunity here. If brand recognition drives sales then the eventual premium they could charge would seem to justify a lot of free hoodies up front. How else can we explain Abercrombie and Fitch, once a middling brand of fishing/hunting wear now international purveyors of pre-teen libido?

Normally this kind of rent seeking would be doubly inefficient. Resources wasted in a competition to corner the market, then the inefficient scarcity under the resulting monopoly. But in this case the rent seeking behavior involves giving away the stuff that’s eventually going to be so scarce. Moreover, since we apparently want to wear only the coolest clothes, the eventual monopoly may in fact be the first-best outcome. So we have firms competing to create the surplus maximizing market structure and in the process handing out all the accompanying rents in the form of euro-inscripted jeggings.

3 comments

The welfare questions seem like they would get complicated here because a consumer’s (Hicksian) demand for Aeropostale depends upon the number of other people who wear Aeropostale, which is, of course, a function of other consumers’ demands. It also seems like questions about welfare and conspicuous consumption could be raised in similar contexts (maybe not with Aeropostale! :) Let’s say shopping at Neiman).

On the one hand it seems like this should be modeled as a strategic game since consumer’s choices affect other consumers’ payoffs. On the other hand, if we think each consumer has negligible contribution to the overall market, then maybe the right model is one where each consumer has a type and this is influenced (or wholly determined) by market aggregates, which each consumer takes as given; in the wholly determined case we might as well call market quantity “type.” I’m not sure how much traction we would get in calculating equilibria here, or if the typical welfare calculations even make sense in this context.

The takeaway to me is: welfare can be hard when consumers don’t have a single preference relation defined over (their own) bundles of goods.

I am sure the welfare people have thought about these questions at some point but I do not know the literature.